Medicaid Applicant’s Support Trust Considered a Countable Asset

A discretionary support trust for the benefit of a Medicaid applicant is deemed a countable asset for eligibility purposes.

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Biagetti v. R.I. Dept. of Human Serv. (R.I. Super. Ct., No. PC 09-7370, Feb. 25, 2011).

Facts.  In 1998, Jeanne M. Biagetti created a revocable living trust.  The trust provided that Ms. Biagetti would serve as the sole trustee of her trust until she became incapacitated or disabled, at which time her son would serve as successor trustee.  The trust terms also provided that, if Ms. Biagetti became disabled, the successor trustee was required to pay the net income of the trust to her for her health and welfare; however, the trustee was granted the discretion to make distributions of principal to Ms. Biagetti.

In 2009, Ms. Biagetti applied for Medicaid benefits and was denied because the assets available to her from her trust were considered a countable resource by the state.  The hearing officer ruled that, since the trustee was not given sole discretion to make distributions from the trust, the trust is a support trust and therefore an available asset, for eligibility purposes.

Ms. Biagetti appealed the hearing officer’s decision, arguing that the once revocable trust became irrevocable upon her disability, since (by the terms of the trust) she was no longer able to make changes to the trust.

The Court’s Decision.  The Rhode Island Superior Court affirmed the hearing officer’s decision, holding that Ms. Biagetti’s trust was an available asset because it was a support trust.  According to the court, “as a result of the lack of sole discretion on the part of the trustee and the requirement that Ms. Biagetti is paid the net income and supported, this trust is a support trust.”  Given that the trust is a support trust, it is irrelevant whether the trust is revocable or irrevocable.  Therefore, Ms. Biagetti was required to spend down the assets in the support trust in order to meet the resource limit for Medicaid eligibility.

Recommendation.  Although a support trust is considered a countable resource for Medicaid eligibility purposes, there are certain types of trusts that are not treated as countable resources for a person applying for Medicaid benefits.  If a person with a disability has or may receive assets in excess of the Medicaid resource limit, the assets can be transferred to a properly established special needs trust.  A special needs trust is designed to protect and distribute funds in such a way that they will improve the quality of life of the trust beneficiary without causing ineligibility for public benefits, such as Medicaid.